Are Employers Willing To Risk Getting PAID?

Jackson Lewis P.C.

Last month, the DOL announced the Payroll Audit Independent Determination program (“PAID”), a self-auditing program designed to encourage employers to uncover and voluntarily report potential minimum wage and overtime violations and avoid the risk of penalties or liquidated damages that would be imposed if the Agency discovered the violations in the first instance.  We initially discussed the PAID program here.

This week, the WHD formally began the six month (or so) trial program and posted additional guidance, including a “Q & A” section, regarding the program on the DOL’s website, to provide further detail as the circumstances under which the program is (and is not) available and, presumably, to ease concerns that employers, who are contemplating participation in the program, might have.  Specifically, the WHD identifies the following eligibility requirements as to any proposed PAID self-audit:

  • The employer is covered by the FLSA;
  • The employees at issue are not subject to prevailing wage requirements under the H-1B, H-2B, or H-2A Visa programs; the Davis Bacon Act or related acts; the Service Contract Act; or any Executive Order;
  • Neither the WHD nor a court of law has found within the past 5 five years that the employer has violated the minimum wage or overtime requirements of the FLSA by engaging in the same compensation practices at issue;
  • The employer is not currently a party to any litigation (private or with the WHD) asserting claims involving the same compensation practices;
  • The WHD is not currently investigating the compensation practices at issue;
  • The employer is not specifically aware of any recent complaints by its employees or their representatives to the employer, the WHD or a state wage enforcement agency asserting FLSA violations of the compensation practices at issue; and
  • The employer has not previously participated in the PAID program to resolve potential FLSA violations from the same compensation practices.

In addition, DOL states that absent evidence of health or safety concerns (e.g. potential child labor violations), if it declines an employer’s request to participate in the program it will not use that request as a basis for a subsequent investigation.  But DOL acknowledged that PAID self-audit requests will be subject to Freedom of Information Act (FOIA) requests, which could result in unwanted publicity for and/or additional litigation against employers.

The guidance does not address potential parallel claims under state law, over which the DOL has no jurisdiction and, as Acting WHD Administrator Bryan Jarrett reiterated during a DOL-sponsored webinar yesterday, the PAID program does not currently cover other potential claims (e.g. FMLA claims) regulated by the Agency.  The concern as to how, if at all, the PAID program would alleviate possible liability for parallel state law claims was underscored last week when New York Attorney General Eric Schneiderman announced that his office will continue to investigate such claims and seek full remedies under state law, regardless of whether an employer has separately participated in the PAID program.  Deriding the program as a form of amnesty, Schneiderman referred to it as “nothing more than a Get Out of Jail Free card for predatory employers.”  Of course, many state wage and hour laws provide protections and remedies for employees greater than those available under the FLSA.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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